Kentucky legislature fails again to fix state's broken pension system

jbrammer@herald-leader.combmusgrave@herald-leader.comMarch 1, 2013 

FRANKFORT — With only eight days left in this year's state lawmaking session, the Democrat-led House and the Republican-led Senate are at a stalemate over how to reform the state's ailing pension system.

So deep is the divide between the two chambers that they have taken the unusual step of rejecting the other's legislation on the most important issue of this year's General Assembly.

Kentucky's public pension system faces more than $18 billion in unfunded liabilities. It covers almost 325,000 people.

On Friday, the state House decided not to accept the latest version of Senate Bill 2, a bill to tweak the state pension system. On Thursday, the Senate rejected House Bill 416 — which contains funding for the underfunded pension system — saying the House did not have the required 60 votes for a revenue-generating bill during a 30-day session.

Republican senators and Democratic House leaders said Friday it would be the other chamber's fault if a special legislative session is needed to fix the pension system.

House Speaker Greg Stumbo, D-Prestonsburg, said Friday that a pension fix could be passed in the waning days of the legislative session.

"It's still got a chance," Stumbo said.

The House has proposed a funding plan that relies heavily on proceeds from expansion of lottery games and instant racing to finance pensions. The Senate has said the legislature can wait to address funding in the 2014 General Assembly, when the two-year state budget is to be considered.

Both chambers have passed versions of Senate Bill 2, which makes changes to the pension system. But the chambers are far apart on how to make those changes. The Senate's version of SB 2 includes recommendations from a task force that suggested moving new employees into a 401-K type plan and eliminating cost-of-living increases for retirees. The House plan keeps the traditional defined-benefit structure and allows for cost-of-living increases only if there is money to pay for it.

Senate leaders said Friday that they want to appoint a conference committee to iron out differences on Senate Bill 2, but they weren't willing to discuss House Bill 416.

Several senators took to the floor Friday morning to decry Stumbo's refusal to accept SB 2 from the Senate.

Senate Majority Leader Damon Thayer, R-Georgetown, asked "if the speaker of the House just made a move to kill pension reform for this legislative session."

He said the Senate stands ready to work on pension reform and urges the House to form a conference committee to try to iron out differences.

"This is a serious issue," Thayer said. "If the General Assembly takes no action, Kentucky in four years will go off its own fiscal cliff because our public pension system will be insolvent."

Senate President Robert Stivers, R-Manchester, said, "I've done everything I know to open up this process, to not be accused of being a bully or the obstructionist, to have open dialogue, to sit down and find out what the real problems are and come up with real solutions."

House Democrats countered that Senate Bill 2 will not fix the state's pension system or the state's credit rating.

Without funding for the pension system — HB 416 — the pension problem isn't fixed, Stumbo said Friday. He said he wouldn't appoint a conference committee for SB 2 unless the Senate wanted to discuss HB 416.

"Until we identify a funding source that is re-occurring and dedicated, our bond rating will suffer," Stumbo said.

Earlier this year, Kentucky's bond rating was downgraded largely because it has not addressed funding for the pension system.

Jack Brammer: (502) 227-1198. Twitter: @BGPolitics. Blog:

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